WELCOME TO MY PRESENTATION

Presentation topic : Internal sources of capital

Submitted To :-
Nusrat Nargis
Assistant Professor
Department of Business Administrative

Submitted By :-
Sadin sikder
ID:- 192-11-6292
 Internal sources of capital
Inernal source of capital refer to money that comes from within a
business.There are several internal method a business ca use,
including owners capital, retained profit and selling aseets.
Sources of Internal Capital
1. Promoters’ Initial capital

2. Retained Earnings

3. General Reserves

4. Dividend Equalization Fund

5. Sinking Fund

6. Workmen‘s Compensation and Welfare

Fund

7. Outstanding Expenses

8. Provident Fund of Officers and

Employees

9. Sale of fixed asset and overuse of fixed

asset
Sources of Internal Capital
• Promoters’ initial capital- This is the capital brought by owners when they start a business.

According to the formation and nature of organization the amount of owners capital vary.

• Retained earning- it is the amount of net profit after distribution of dividend to the

shareholders. It is an important source of internal capital. It can be in the form of Internal

Financing

• General reserve- It is the amount of reserve accumulated for general purpose rather than
distributing it as dividend from the net profit. The largest amount of accumulated profit is
transferred to this reserve.
Sources of Internal Capital
• Dividend Equalization Fund- Every company’s shareholder expect divided at a particular

rate but due to the instability of earning that is not always possible, so in the years when
more profit is earned a part is kept aside to compensate for the years when the earning
is too low to declare divided. This fund is a source of internal financing.

• Sinking fund- Whenever organizations take long term loan or issue bond there is a

sinking fund provision where a fund is kept aside from the net profit so they are not
under financial pressure at the time of loan repayment. Every year a certain amount of
profit is put aside in this fund and until the loan is repaid this fund acts as an internal
source.
Sources of Internal Capital
• Provident fund of officers and employees- in order to make sure that the employees
do not suffer from insecurity in their old age a portion of fund in kept aside from their
salary. The amount accumulated in their fund will be paid at the end of their service so
in the time being this can be used for internal financing.

• Sale of fixed asset and overuse of fixed asset- many a times companies have asset
that has been left unused, overused or does not have any more utility, fund can be
accumulated by selling these assets. Sometimes overused asset are further used to
avoid huge amount of cash outflow needed to replace it with a new one.
THANK YOU EVERYONE